Credit Card Debt Management

Credit card payments can strap your budget and have you financially imprisoned in no time. The more you use them, the higher your payments increase, which means most people have to use the cards more when their money runs short. The 18- to 34-year-old demographic is the hardest-hit right now. With social pressures for this most coveted advertising demographic to buy everything under the sun, the group is becoming known as “Generation Broke,” as the Intelligent Ignorance blog humorously points out. Set aside all psychological analyses as to why they feel the need to dig themselves deeper into debt to maintain a certain lifestyle, let’s look at the ABC’s of digging Generation X and Y out of debt.

It boils down to savings — you know, that little account that bails you out of emergency situations when you don’t want to rely on your credit cards? The other thing is to define an emergency situation that requires you to dip into your savings account (it’s not when the Jimmy Choos are on sale). The following four tips can help you stretch your dollars, so money can go into your all-important savings account and ultimately, toward paying off your credit card balances.

Find an inexpensive hobby. You can certainly find other uses for your time than shopping, dining out, visiting the movie theater, etc. What about things that cost little or no money, like exercising, blogging, reading, making art or music, volunteering, or going on a picnic? All you’re out is the gas money to get there, which come to think of it, could be quite a lot. You could go really thrifty and invite friends over to your house for a game night or bonfire and let them spend their gas money instead.

Rediscover your kitchen. Far too many people spend far too much money on dining out. It is so much less expensive to cook — and you have leftovers for lunch or dinner the following day! I once calculated that my family was spending a shocking $600 per month on restaurants. If you must eat out, try the dollar menu. There’s some good stuff on that list!

Plan in advance for gift-giving. You may see a wedding, new baby, birthday, or holiday in your near future. Start setting money aside now for those seasons. You can even go ahead and buy the gifts while you’re out and about, when you see nice things on sale. That way, you’re not scrambling at the last minute and overpaying for convenience. This is particularly true during Christmas, the season when most people tend to overspend dramatically.

Buy clothes secondhand. We’ve all known the person who must keep their closet filled with only the latest fashions. They toss out old clothes that are “so last summer.” Maybe your track record shows that you in fact are one of these people. Word to the wise: Stop being one of those people and start benefiting from their generosity. That’s right, these are the people who are filling secondhand stores like Plato’s Closet and Goodwill with beautiful, fashionable, name-brand clothing at low, low prices. How generous! Another shopping strategy is to pick well-made, durable, but versatile pieces that work well with a variety of other clothing items, so you’re splurging only on a few special items instead of on everything. Happy saving!

We’ve heard about balance transfer fees, application fees, late payment fees and overdraft fees. But what about when credit cards pay you for your business? We’re not talking about your garden variety rewards points or cash back for purchases, but serious bonuses merely for signing up! Could a credit card company be so generous? You better believe it, and here’s a list of the ones who are:

Bank of America World MasterCard with World Points, Bank of America Visa Signature with WorldPoints Rewards and Bank of America Rewards American Express Card all offer new customers a $50 statement credit. To qualify, the new account must be used within 45 days to make any purchase, balance transfer or cash advance of at least $25 before transaction fees.

The American Express Preferred Rewards Gold Cardoffers new customers 10,000 Membership Rewards Bonus Points after their first purchase with the new card. The points are redeemable for a $100 gift card.

One, from American Express, offers new customers $50 to “jump-start their savings.”

The Nest, from American Express, offers new customers a “nest-warming” gift of 5,000 Membership Points, redeemable for a $50 gift card.

Chase Freedom Signature Visa offers new customers $50 after their first purchase with the card.

Chase Freedom MasterCard offers new customers $50 after their first purchase with the card.

These are all good options for a great start to your life as a credit card holder, and they’re a great way to make your credit cards work for you!

 Source: Master Your Card blog

If you are a business owner who provides a service instead of tangible goods and you accept payments via Paypal, you may want to beware. Cara Williams over at the Freelance Switch blog recently detailed her experience with Paypal as a graphic designer.

In her case, a sizable Paypal payment was unjustly reversed by her client six weeks after it was made. The client falsely claimed that he paid for artwork that was not actually received. Immediately after reporting the “problem” to the credit card company and to Paypal, the client was issued a refund and Williams’ Paypal account abruptly went far into the negative. All this occurred without Williams ever being given the option to present her side of the story.

In Paypal’s defense, after the fact, they heard Williams’ complaints and even helped her “gather a case” to present to the client’s credit card company. Of course, the credit card company would only take the side of their customer and refused to acknowledge any other point of view. So the efforts of Williams and Paypal were all for nothing. It sure would have been nice if Paypal had consulted her on the dispute before issuing the refund from her account.

If you are a service provider, you may want to use a third-party payment collector that offers better protection and helps settle disputes. Another option is to get a legally binding contract, signed by both parties, stating clearly that payment is issued only when all services and/or goods have been provided to the client’s satisfaction. Bottom line: Protect yourself when dealing with credit cards on the Internet, not only as a shopper but also as a service provider receiving payment.